Individuals are under unprecedented financial pressure as the economic downturn continues. Many people are deeply in debt and struggling to keep up with their monthly financial obligations. Unmanageable debt loads, delinquencies, foreclosures and bankruptcies are becoming common. However, unpaid consumer debts affect everyone. Unmet financial obligations raise the cost of doing business and are passed through to members of society in the form of higher prices for goods and services, higher taxes, and higher banking and finance charges. As such, resolving unpaid consumer debt and facilitating repayment is considered important in restoring the financial health of consumers and in helping businesses weather difficult economic times.
Collection authorities and the debt collection process are vital to a credit economy by recovering amounts owed to lenders and enabling them to continue lending. Some collection authorities acquire the portfolios of charged-off debt and debt of consumers in bankruptcy, as well as other types of debt, at a discount and seek to collect a multiple of the purchase price over the economic life of a portfolio. Exemplary types of debt in such portfolios may include Chapter 11 debt, Chapter 12 debt, Chapter 13 debt, secured and unsecured bankruptcy debt, dismissed bankruptcy cases, threatened bankruptcy debt, credit card debt, installment loans, lines of credit, secured automobile and automobile deficiencies, medical debt, retail debt, telecom debt, utilities debt, and the like.
In a typical bankruptcy proceeding, there may be several creditors involved with a single debtor. Each creditor may file one or more claims against the debtor. The bankruptcy court appoints a trustee to manage the claims against the debtor. The trustee collects payments from the debtor and distributes the payments to the creditors in order to satisfy the claims against a loan(s), according to the bankruptcy plan confirmed by the bankruptcy court.
A collection authority generally maintains an electronic file for a loan or debtor that is in active bankruptcy. The file includes data related to the loan and the corresponding claims as defined in a proof of claim (POC). For example, the file typically includes the loan number, the borrower's name, the borrower's social security number, the bankruptcy case number, and the trustee name, among other types of information. A collection authority typically receives trustee data relating to claims and loans that are in the loan servicer's portfolio from a database of the National Data Center (NDC). As known to those skilled in the art, the NDC is a repository of bankruptcy trustee data. The NDC has agreements with the majority of the bankruptcy trustees in the United States. The NDC receives updates from bankruptcy trustees with data related to each of the debtors over whom they have jurisdiction for the collection and distribution of the debtor funds.
Unfortunately, a collection authority, upon receiving trustee data from the NDC, typically is required to undergo a time consuming and tedious process to determine which accounts have received a payment from a debtor. For example, when an NDC voucher file is received by a collection authority, the collection authority has to match debtor payment transactions to the collection authority's account. The person performing this task then has to copy payment data that was matched to a collection authority's account into another system so that those payments can be posted into various accounting and financial systems.